Apple Investors Should Brace for Volatility, Says Wells Fargo

A dearth of new product launches, tighter competition and higher component costs mean Apple Inc. (AAPL) may now struggle to convince investors to keep buying its shares, a Wall Street analyst new to covering the stock has warned.

In a research note published on Tuesday and reported on by CNBC, Wells Fargo’s new recruit Aaron Rakers slapped a market perform rating on Apple shares. Without a major new catalyst to replace the buzz created by the iPhone 8 and iPhone X, he claimed that the stock will no longer surge and instead begin to provide returns in line with the rest of the market.

"We believe strength in shares of Apple have, in part, been driven by a 'chase-the-performance' trade ahead of the iPhone 8/X product cycle," wrote Rakers. "We think the shares could now see increased volatility, with a focus on incremental derivative demand and mix data points over the coming months."

The analyst then went on to note in specific detail the various challenges that risk weighing on Apple’s share price in the future. Rakers said the company is currently in a “what’s next” phase and isn’t guaranteed to emerge from it with the same support that it previously enjoyed from investors. (See also: Apple to Launch Three iPhones Next Year: KGI)

"While we applaud Apple's execution and continual ecosystem buildout, the inevitable shift to what's next should once again surface post the iPhone 8/X cycle," he wrote. "We expect some investors to continually question Apple's rate of innovation (focus on Apple's significant R&D investments) for the iPhone as competitors offer similar features and cheaper smartphones."

Another challenge that threatens to undermine confidence in Apple’s prospects, the analyst added, is rising prices of memory chips. These components, which are used in the company’s computing and smartphone products, are becoming increasingly difficult to get hold of and more expensive to procure as a result.

"Given the tight memory supply/demand dynamics, Apple's results could be negatively affected by lack of supply or higher-than-expected prices," he wrote.